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Beginning in 2014, the ACA includes a mandate for most individuals to have health insurance or potentially pay a penalty for noncompliance.  The Supreme Court has ruled that this mandate is constitutional under the government’s power to tax the population.   According to the mandate, individuals will be required to maintain minimum essential coverage for themselves and their dependents.  Some will be exempt while others may be given financial assistance to help them pay the cost.

What type of coverage satisfies the mandate?

Minimum Essential Coverage is defined as:

  • Government sponsored plans
  • Employer sponsored plans
  • Plans in the individual  market
  • Grandfathered health plans
  • Any benefit coverage recognized by HHS.

Minimum essential coverage does not include excepted benefits such as dental-only coverage.

What is the penalty for non-compliance?

The penalty is the greater of:

  • For  2014, $95 per uninsured person or 1% of household income
  • For  2015, $325 per uninsured or 2% of household income
  • For  2016, $695 per uninsured or 2.5% of household income

The other notable provisions include prohibiting insurers from discriminating again those with pre-existing conditions, expanding those who qualify for Medicaid to include those families making up to 133% above the poverty line, requiring more employers to offer health care options or pay a penalty, as well as the government option, and establishing a government database.

Who will be exempt?

  • Individuals  who have religious exemptions
  • Those  not lawfully in the U.S.
  • Incarcerated  individuals

Are there exceptions to the penalty?

Yes a penalty will not be assessed on individuals who:

  • Cannot  afford coverage based on formulas contained in the law
  • Have  income below the federal income tax filing threshold
  • Members  of Indian tribes
  • Those  uninsured for short coverage gaps of less than 3 months
  • Received a hardship waiver from the Secretary, are residing outside the US, or are residents of any possession of      the US.

What’s on the horizon?

  • Significant Changes in Costs. You  can expect to pay more out of pocket for coverage than you otherwise would, even given the availability of premium assistanceWhy?  Age rating limits how much premiums can vary based on a person’s age, meaning insurers can  no longer charge older individuals proportionately higher rates than younger people.  ACA caps the ratio at 3 to 1.  In most states the ratio  is currently 5 to 1. The consequence is that the younger will pay significantly more so that older individuals will pay slightly less.
  • You will probably see a narrowing of  benefit plans and designs offered by the insurers, even in private market, to accommodate the large scale initiative.
  • People getting health care through employers probably will not have a big impact.  The trend will keep moving towards consumer driven plans, which is really independent of health reform.